Hong Kong’s buoyant market is expected to propel the city to take the title of top IPO destination for 2018, according to figures released by KPMG China.
A strong Q3 performance coupled with a robust listing pipeline led KPMG to revise its annual IPO fundraising forecast for the city from HK$250 bn ($32 bn) to more than HK$300 bn.
Analysis from the company’s research shows that for Q3 alone, the city’s main board is set to record HK$190 bn in total funds raised from 40 new listings, exceeding the overall HK$122.6 bn recorded in all of 2017. This boost is attributed to the largest deal of the period – China Tower Corp’s HK$54.3 bn IPO – as well as a number of listings from new-economy companies that contributed to almost half of the funds raised in Q3.
Commenting on the release of its figures, Maggie Lee, head of the capital markets development group for Hong Kong at KPMG China, says: ‘The new listing regime for companies from emerging and innovative sectors has generated significant interest from new-economy companies globally. Three pre-revenue biotech companies and two with weighted voting right structures completed their IPOs by the end of Q3. We expect to see six to 10 pre-revenue biotech companies list by the end of 2018 as the trend continues.’
According to KPMG’s figures, it is these new-economy companies – working in sectors based on technology and the internet – that are driving Hong Kong’s success, with more than one fifth of IPOs in 2018 listed through traditional requirements being for new-economy firms, compared with less than 10 percent in 2017.
At the end of last year, Dealogic data showed that Hong Kong had lost its IPO crown to New York, noting that the city was still feeling the impact of losing Alibaba to the NYSE in 2014. But Hong Kong Exchanges & Clearing this year approved dual-class share structures – a sticking point in the run-up to Alibaba’s listing – and changed rules to allow biotech firms without profit or revenue to list. In May, Ascletis Pharma became the first firm to file for an IPO under the new pre-revenue rules in Hong Kong, going on to raise an estimated $400 mn in July.
Hong Kong’s IPO boom contrasts with a slowdown in the A-share IPO market that has experienced declining listings and funds. The Shanghai and Shenzhen stock exchanges are expected to raise a combined RMB122.7 bn ($17.8 bn) from 89 IPOs at the end of Q3, compared with RMB175.8 bn from 350 IPOs a year earlier.